News & Commentary

Rainbow Media CEO says free online video is 'insulting'

Head of AMC and WE networks supports Time Warner/Comcast effort

By

DavidB. Wilkerson

CHICAGO (MarketWatch) -- As Time Warner and Comcast announced plans to begin a trial of Time Warner's "TV Everywhere" initiative, making a number of cable TV shows available online only to Comcast subscribers, some of that cheering you heard came from Josh Sapan.

Sapan is the chief executive of Cablevision
CVC, -0.47%
-owned Rainbow Media, the parent of cable networks AMC, WE: Women's Entertainment and IFC, and he's a fierce opponent of making cable shows available for free online when people normally have to pay to see them on television.

"I do think it's important to be technologically progressive and responsive to what consumers want. But that's a different thing, in my mind, from creating bad habits," Sapan said in an interview. "To offer these shows for free ... It's almost insulting to the consumer who's paying money for it, because it says to that consumer, 'What are you doing?' "

Cable networks generate revenue in two ways: through advertising sales, and through fees paid by cable, satellite and telephone companies that provide video services. That model has worked for many years.

Now, however, programmers and video distributors worry that the wide availability of free, ad-supported television shows online through sites like Hulu, Veoh and Google's
GOOG, +0.42%
YouTube may one day lead many consumers to stop paying for subscriptions to cable and satellite TV providers.

If people won't pay cable operators for video, the operators won't be able to fork over huge sums of cash to cable channels like ESPN, TNT and those under Rainbow's umbrella.

Sapan said that would compromise cable's ability to deliver programming that will attract the viewers advertisers want.

"At AMC for example, cable's dual revenue stream has led to pretty good economics, which have allowed us to go through an evolution on the channel in which we've added original programming with enough merit to improve our brand," he explained.

The AMC dramas "Mad Men," about a group of edgy advertising professionals in New York during the early 1960s, and "Breaking Bad," the saga of a terminally ill chemistry teacher turned drug dealer, have been critical to the expansion of AMC's audience in the last 18 months. See related story.

Few people think so-called "cord-cutting" would happen right away, but media companies want to get ahead of such an eventuality before it even begins to develop.

Time Warner
TWX, -0.28%
came up with what it calls "TV Everywhere," a plan to make online viewing of cable shows available only to paid subscribers. On Wednesday, it announced a plan to team up with Comcast
CMCSA, -0.26%
on a trial run of the system, though few other details were given. See related story.

Asked if there might be a consumer backlash among people who don't want to pay for a video subscription, Sapan pointed out that more than 100 million people currently subscribe to some kind of pay television.

"So the number of people who may be disappointed or disenfranchised because they're not currently paying for TV .. is a teeny number. It's really minscule."

Sapan said ratings momentum at AMC and WE, which were strong throughout last year, has continued this year.

At WE, which competes with the female-targeted channels Lifetime and Bravo, ratings rose 30% year-over-year during 2008, according to data from Nielsen Media Research. The channel is perhaps best known for its Sunday-night block of wedding-themed shows, anchored by "Bridezillas," which is in its sixth season.

For WE, wedding-related shows "seem to be something women can engage with and consume, when they're not pointedly seeking information about planning a wedding," Sapan noted. "It feels like it's a gender flip of some of the enthusiasm men have for sports."

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